August 25, 2014

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A business model I’m sorry we’ll never see We’re all intimately familiar with the cell phone business model. Buy the phone today at a reduced price that’s subsidized by what’s typically a two-year commitment with that carrier. Other options have emerged in the cell phone arena but this low-price-plus-lock-in model remains extremely popular. There was a time when I thought we’d see the same model applied to e-readers and tablets. I wasn’t the only one speculating that eventually the Kindle’s price would go to zero for consumers willing to commit to purchasing some minimum level of content over a period of time. One example is this sort of offer: “Get a free Kindle when you agree to purchase at least 15 ebooks over the next two years.” The same model can work with any digital content, of course, not just ebooks. So newspapers, magazines and music could have been used to attract consumers. That never happened and I’m not optimistic it ever will now. Why? Because Amazon doesn’t need this option to grow their business. Amazon is now so powerful it not only influences but also determines the business models for everyone in the ecosystem including publishers and other retailers. A few years ago it would have made sense for another retailer to try and gain some momentum with a free device that’s subsidized by a content purchase commitment. Fence-sitting consumers might have been more inclined to acquire a free e-reader or tablet even if it meant committing to future content purchases. The ebook retailer market share numbers we see today might be somewhat different if someone not named Amazon would have tested this model a few years ago. So why is it too late for another retailer to give it a shot? First of all, it would now come across as a Hail Mary, a futile, last-ditch effort to remain relevant. Second, I don’t think consumers would respond as well as they might have before Amazon added so many elements to Prime membership. Prime not only means free two-day shipping these days. It’s also an alternative to Netflix and Spotify, for example. And even though Amazon’s video and music catalogs aren’t as broad as Netflix or Spotify, most consumers perceive those services as throw-ins to the free two-day shipping that’s still the heart of Prime. Third, and perhaps more importantly, I think other retailers now know that any model they offer will quickly be copied and likely squashed by Amazon. That may have always been the case but it feels like there’s no less room for retailers to innovate and compete than ever before. Besides, Amazon is (and should be) more focused on making Prime as broad and irresistible as possible and less interested in the more limited goal of free devices to secure future content purchase commitments. Even though Amazon started with books they’re now making more money from people like me because I’m ordering so many other things. They don’t want to be the next Barnes & Noble when they’re on their way to becoming the next Walmart instead.
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Three lessons from comScore’s latest mobile apps report comScore recently published a 15-page report on the state of mobile apps. It’s well worth reading in its entirety, but if you don’t have the time, here are the three big takeaways for content publishers: Mobile apps are the new digital engagement king. Prior to 2014 the combination of desktop plus mobile browser was where digital engagement was happening. Now mobile apps are the leader, but there are some caveats. 75% of a user’s time is limited to four apps. Given that trend, what’s the likelihood your new app will replace one of those popular four? The key here is to make sure your content plays well and is seamlessly integrated with the apps that are already attracting all the eyeballs. Mobile is just one critical element of a device-agnostic strategy. Digital engagement on the desktop isn’t dead. In fact, according to the Comscore report it’s up 1%. OK, that’s not exciting growth but it’s important to note that desktop engagement is holding its own...for now. So while the combination of apps and mobile browsers represent 60% of total digital engagement, the 40% represented by desktop is still significant enough to warrant attention. Does the user experience change when a customer shifts from consuming your content on a phone to a tablet or desktop? Don’t treat any device/platform as a second-class citizen. Even though mobile apps have all the momentum it’s important to make sure you’re not forcing your customers to learn a new UI when they switch from one device to another. (Hint: Think HTML presentation/consumption.) Downloaded and then forgotten. An earlier report from Nielsen indicates consumers typically use 23-27 apps per month. If you’re like me your phone already has a heck of a lot more than 27 apps on it. And I’ll bet you’re downloading several new apps every month, but for the most part you’re probably still using the same ones over and over. So we’re all a bunch of app hoarders. We download a new app, maybe open it once or twice and then abandon it. Remember that old saying about how it’s easier to sell something new to an existing customer than it is to acquire a new one? Someone who has already discovered and downloaded your app is closer to engaging with your content than someone who may not even know the app exists. So what are you doing to remind (or incent) inactive users to open and take advantage of that app they downloaded?

Joe Wikert

I'm Chief Operating Officer at OSV (www.osv.com)

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